Reciprocity impact On The Development Of Relations



Introduction. 1

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Canadian American relations. 1

Conclusion. 9





Canada was known as the British North American Province in the year 1855, and later on became ratified through a Reciprocity Treaty. The previous year, the treaty was signed and joined together with the rest of America. The reason for coming up with the treaty was to enhance trading activities between the two countries. Furthermore, it was to ensure that the Corn Laws introduced by the British would not affect Canada as much. Also, it sorts to make sure that goods originating from Canada would have markets[i]. Moreover, any natural resource, which existed, had a market, and this is due to the existence of free trade. The Reciprocity allowed for American access on St. Lawrence River and the Maritimes. Canadian ships benefited as well, as they had similar toll rates as that of the Americans.

This paper seeks to give a critical analysis on the impact of the Reciprocity Treaty (1854-1866), to the development of Canadian American relations. It further seeks to find out the impact it had on their trading activities, as well as their economies.

Analysis of the impact of the Reciprocity Treaty (1854-1866), to the development of the

Canadian American relations

There is a need to know how Canada has benefited from the Reciprocity agreement. According to research done during the time the agreement existed, it was found out that trade between the two countries had increased. America is referred to as Canada’s mother colony, as it offers the market needed for the latter’s products. After the Reciprocity Treaty was completed, trade increased significantly. The relations based on trade that existed between the United States and Canada was of a healthy nature. This began as the Reciprocity treaty was initializing. According to statistics, from the years 1853 to 1856, America’s and Canada’s trade increased to around 250%. In turn, the Gross Domestic Product of Canada improved significantly as Canadian exports were of high value.

Controversy exists concerning whether Canada benefited from the agreement meant to facilitate trade. Some authors have suggested that it is difficult to find out the exact impact of the Reciprocity treaty. Changes were brought about in Canada when the agreement was implemented. There are many variables that have proven this to be true, as they are confounded to be valid. Other factors have played a role in ensuring that trade succeeds on Canada.

Currently, Canada places a lot of confidence and importance on its relations with the United States. They are economic in nature, and they contribute to the Canadian GDP. Canada has many partners that it trades with, but the United States is the most vital partner. The percentage of exports and GDP that are exported to the United States is 70% and 30% respectively. In turn, technology and capital and provided by the united states to Canada. The latter takes place in the form of foreign investment. The Canadian economy is controlled and owned by the United States in many ways. The United States boasts that Canada is its principle customer because of the trade they are involved. Most of the products, which are exported to the United States, are manufactured. The United States industries benefit from natural resources that are found in Canada.

Canada is being affected by the commercial arrangements that exist with the United States. Furthermore, the number of people in the two countries is high, and it is affecting trade that exists. American policies affect the vulnerability and dependency of the relations that Canada has with America. The need to obtain services and goods from the Canadian market has made investment firms step up their game. The US government and corporate world are now aware of the benefits of working together to improve trade. In turn, the US is ensuring that Canadian polices do not have the strength to interfere with American policies. Other attempts, which are being, made include; implementing fair land and tax regulations and controlling investment.

Free trade is the main issue why there have been relations between Canada and America concerning economics. For a long time in Canadian history, some of its citizens have been against achieving free trade that is extremely complete. They believe that Canadians will lose out on all their political sovereignty. Also, it will lead to industrial and economic policy integration, which will have adverse effects on people. Canada will also find it difficult to come up with policies that are economically independent. Many other options exist concerning how the US will benefit from such arrangements. Canadians will not benefit from the agreement as gains will be hindered by non tariff barriers implemented by the American congress. On the other hand, its supporters believe that Free Trade is beneficial to the economy of Canada. Also, manufacturers in Canada will have the opportunity of becoming producers with sales volume that are high. In turn, development and research will be supported to assist Canadian manufacturers. Canada is involved in an industrial strategy that seeks to improve its development through research.

The Reciprocity treaty of the year 1854 was abrogated in 1866 by the United States. The confederate states were being taken over by the British, and the US had to assist. The Washington treaty of the year 1871 was formed as an attempt to come up with meaningful negotiations. Unfortunately, it did not succeed as the Reciprocity treaty could not be restored. The Fenain Raids brought about a lot of damage, and there was no compensation awarded to those who were affected. Fortunately, Canada was recognized as a North American country by the United States. There was a federal election in the year 1891, and unrestricted free trade was advocated by the liberals. They were not successful in addressing this issue and in turn lost, but only to a small extent. Policies, which were high-tariff and protectionist, were maintained by the United States. Canadian proposals on free trade were rebuffed by the United States.

In the years between 1875 and 1900, there was a need to come up with economic integration. In turn, Canada and the United States became suspicious about their political situation. Branch plants were established all over Canada by the US, as the latter had made heavy investments. It also took over a majority of enterprises owned by Canadians, and an example is the Imperial Oil. In the year 1898, it was the largest Canadian oil company, which was bought by a company known as Standard Oil. The improvements were seen in other sectors of the economy such as transport, trade, business, labor and finance[ii]. Canada adopted a national policy that focused on ensuring that existing policies were high tariff based. The latter were responsible for attracting many of the American investors. By the year 1914, non –resident investment was obtained from the United Kingdom and brought to Canada. It is estimated to be at 72%, while investment obtained from the US was twice that amount. The United Kingdom benefited in its manufacturing and mining industries as it received capital from the US for direct investment. During this time, the United States and Canada ensured that they were affiliated as burgeoning took place[iii].

It seems that the year 1911 will be forever be remembered by Canadians as it affected them. Some manufactured products were to benefit from tariffs introduced by William Howard the then president. He wanted to ensure that a pact that focused on limited free trade existed. This was possible through his efforts and that of his prime minster known as Wilfrid Laurier. They wanted to bring American protectionism to an end and improve the lives of Canadians[iv]. Canadian opposition took their stand and thus, the US congress legislation did not succeed. The issue of free trade was extremely vital in the 1911 Canadian election. Canada was on its way in becoming politically annexed due to Laurier’s defeat.

As the 20th century approached, expansion of industrialization was taking place in Canada and America. The former benefited from a lot of money provided by the United States through various methods. The US wanted to have control of Canada through the creation of branch plants and subsidiaries. In turn, it would enjoy profits from British and Canadian markets. Furthermore, metal processing, machinery processing, electric and motor vehicles were upcoming industries. Problems were bound to occur as Canadians had heavily depended on the US also, due to the Great Depression. This means that they were vulnerable and could easily be influenced by decisions made by the US[v]. A tariff known as the Hawley-Smoot was passed by the American congress in the year 1930. It meant to make sure that imports brought to the United States were heavily taxed. This moment will forever be in the minds of Canadians as it is the harshest and toughest duty that they have had to pay. Canada did not lag behind as it took its own measures to counter attack that of the Americans. It came up with tariffs that were high as those of the Americans. It tried to find a way to reduce its dependence on the US, as well as to penetrate world markets. The tariffs, which existed, were revised during the Imperial economic Conference, in the year 1932, in Ottawa.

In a bid to increase trade and lower tariffs, negotiations took place between the United States and Canada. By the year 1938, the trade agreement between the US and Canada had been signed. In turn, the various tariffs were reduced after two meetings held by the two parties. During the Second World War, Americans and Canadians supported each other due to their renewed relationship[vi]. The Permanent Joint Board on Defense was formed in the year 1940. It brought about close economic relations between America and Canada. Canada benefited from projects such as the Canol, Alaska Highway, and the Norman Wells oil production. The projects were financed by the US as part of the PJBD agreement.

Consumer goods demand increased after the second world war, due to need to obtain war machinery and immigrant influx. In turn, industrial machineries and consumer goods were purchased by the United States. Canada benefited as the rest of Europe, and the United Kingdom suffered from the effects of war. They did not have sufficient foreign exchange and Canada could not rescue this situation[vii]. Before, it had to find ways to solve the trade surplus and trade deficit obtained from its US relations. During the 1950’s Canada benefited from the investment boom as its problems seemed to have disappeared. Since Canada has vast natural resources such as uranium, gas and oil, the US had to find ways to develop and locate them. Fusion of both economies was possible because they engaged in parallel investment. The US assumed a notable corporate control and ownership over Canadian Manufacturing industries, gas, oil and mining.

Canada is facing a dilemma concerning the policies of international trade, which affect it. For many years, it has had relations with the US, and this is a fact that is known to many people. Canada is a member of the Canada-US Free Trade Agreement and this integration is of significant value to it. Developing worlds have not been left behind in the process of growth as they are expanding fast. These changes are affecting the economies of the North American Countries. Canada has been blamed for relying on the US, until it has forgotten that other markets exist. In turn, they are not making enough profits as they should be doing. There are many calls, which seek to ensure that effective polices are implemented, before it is late for the situation to be saved. Policy matters have come up, and they need to be addressed as soon as possible. The Reciprocity treaty is the reason why Canada depends a lot on the US. Other organizations formed to enhance the two countries relations were the North Atlantic Treaty Organization and the General Agreement on Tariffs and Trade. There was a need to ensure that direct confrontations between the US and Canada did not take place.

The two countries need to find ways that they can survive and to prosper. Technology and Industrial capacity are supplied by the US, while raw materials are supplied by Canada. The latter often held meetings with the US on an annual basis to discuss the problem of surplus disposal. Canada made losses as the grains it was meant to obtain were handed out to developing countries. The sovereignty, which Canada held, was being infringed upon Cuba and China, which were subsidiaries of the US. Many Canadian presidents have made attempts to reduce the ties that exist between the US and Canada, but no success so far. It seems that Canadians are not controlling their destiny as the US seems to be handling this matter on Canada’s behalf. Other critics believe that the US is taking advantage of this situation to profit alone. There is distortion of the Canadian economy as it is not developing as it is meant [viii] .

By the year 1965, most Canadians felt the need to free themselves from the power, which the Americans held. They believed that they had to control their economy as well as have foreign ownership reduced. In fact, there was controversy surrounding US magazines that had a market in Canada. This issue led to diplomatic quarrels, banking policy, and tax disputes. The Canadian financial market was affected when the US ensured its funds would not flow freely into Canada. This move became possible after congress passed a law that imposed heavy taxations on Canadians borrowing money from the US. It is extremely clear that the US has more power as compared to Canada. The US did not stop victimizing Canada as it ensured that American multinationals invested their money in the US. When the US makes changes regarding its policies, Canada is affected as it is vulnerable. Canada had to find a way to depend on other able countries rather than America.

The Canadian- American policy was affected by the policy that existed concerning energy. Import quotas imposed by the US had an enormous impact on the gas and oil exports by Canada. The former made it difficult for Canada to sell its oil and make a profit. The Oil Producing and Exporting Countries assisted Canada in matters related to oil. At least, Canada is today enjoying success in this sector, as it can effectively supply and sell its oil. The US was not happy as Canada enjoyed the benefits of increased prices of oil. This matter did not go down well with the US who had to find a way of containing Canada.

Currently, the US has close economic ties with Canada as they seem to have put their differences aside for purposes of achieving success. Since the 1990’s the two governments in Washington and Ottawa have made progress in strengthening their relations. The Liberal Party of Canada has from time to time proven that it does not want to be actively involved with American matters[ix] . It will only do so it the matter is extremely urgent and vital, as well. During the time when George Bush held power, there was bilateral communication between the two countries. The Canadian-American relation has entered a new phase since the 2008 Obama election into office. Most Canadians seem to view Obama as a savior and thus, the reason for being popular with Canadians.

The other sectors, which the two countries corporate is in political and international security issues. This is witnessed and possible through the help of the many international organizations and through bilateral trade[x]. The US and Canadian policies are almost similar in terms of defense and foreign policies. There are only a few areas that are still in contention, but it seems that the matter will soon be solved. They are actively involved in fighting terrorism and enhancing border security. So far, they have worked together in NATO and UN Libyan mission. It seems that the two countries are actively involved in matters related to peace and security.

The largest relationship in the world that deals with bilateral trading is maintained by Canada and the US. So far, it has lasted since the time the Reciprocity Treaty came into existence. This is proven by the fact that free trade agreement approvals have been awarded to them. In the past, the two countries were affected by commercial issues dealing with the economy and trade. Currently, they are constant negotiations on how to improve their various economies. These are in the sectors of entertainment, culture, agriculture, natural resources, and trade among others. The stimulus law of the year 2009, concerning the provision of ‘Buy America’ is what is being debated. It has brought about disputes between the two countries. Luckily, it is only affecting a few of the services and goods that the two countries need and use. At the moment, their relationship based on trade is being affected by the issue on energy. Moreover, they are engaged in ensuring that border waterways are maintained, as well as monitoring transfers of solid waste and air quality. They want to make sure that there territories are not invaded by terrorists.


In conclusion, the Reciprocity Treaty (1854-1866) has shaped the relations, which the US has with Canada. The relationship that exists is beneficial to both of them as well as other countries. The treaty has influenced the way in, which the US and Canada trade with each other. The creation of trade organizations such as NAFTA has made the agreement beneficial to all the parties that are involved. The knowledge that one acquires from the Reciprocity Treaty is more valuable, as compared to the economical aspects. This means that other countries that have similar relations should follow the example of the agreement to improve theirs. The outcome of the American-Canadian relationship has the potential of becoming even better. This means that they have found a solution that will eliminate any barriers to their corporation and growth.



Thomson, Herd. & Randall, Stephen. Canada and the United States: Ambivalent Allies

Montreal and Kingston: McGill-Queen’s University Press, 2002.Print.

Moore, Stephen.  “Defining the ‘undefended’: Canadians, Americans, and the multiple

Meanings of border during Prohibition,” The American Review of Canadian Studies, 34, 1,

(2004): 3-32.

VanNijnatten, Debora. “Canadian-American Environmental Relations: Interoperability and

Politics,” The American Review of Canadian Studies, 34, 4, (2004): 649-664.

Beaulieu, Eugene . “Factor or Industry Cleavages in Trade Policy: An Empirical Analysis of the Stolper-Samuelson Theorem,” Economics & Politics. 14, 2, (2002): 99-132.

Moore, Karl, & Rugman, Alan.  “The Myths of Globalization” Ivey Business Journal 66, 1, (2001): 64-68.

Norrie, Kenneth, & Douglas, Owram. & Emery, Herbert. A History of the Canadian Economy. Toronto: Harcourt Brace & Company, Canada, 2002.Print.

Stevens, P.  “Resource Impact: Curse or Blessing? A Literature Survey,” Journal of Energy Literature, 9, 1, (2003): 3-42.

Sachs, J. & Warner. A. “The Curse of Natural Resources,” European Economic Review, 45, (2001): 827-838.

Romalis, John.“NAFTA’s and CUSFTA’s Impact on North American Trade,” University of Chicago GSB mimeo, 2002. Print.

Muirhead, Bruce. “From Special Relationship to Third Option: Canada, the U.S., and the Nixon Shock,” American Review of Canadian Studies 34, (2004): 23-56.


[i] Thomson, Herd. & Randall, Stephen. Canada and the United States: Ambivalent Allies

Montreal and Kingston: McGill-Queen’s University Press, 2002.Print


[ii]   Sachs, J. & Warner. A. “The Curse of Natural Resources,” European Economic Review, 45, (2001): 827-838.

[iii] Stevens, P.  “Resource Impact: Curse or Blessing? A Literature Survey,” Journal of Energy Literature, 9, 1, (2003): 3-42.


[iv] Moore, Stephen.  “Defining the ‘undefended’: Canadians, Americans, and the multiple

Meanings of border during Prohibition,” The American Review of Canadian Studies, 34, 1 (2004): 3-32.


[v] Norrie, Kenneth, & Douglas, Owram. & Emery, Herbert. A History of the Canadian Economy. Toronto: Harcourt Brace & Company, Canada, 2002.Print


[vi] VanNijnatten, Debora. “Canadian-American Environmental Relations: Interoperability and

Politics,” The American Review of Canadian Studies, 34, 4, (2004): 649-664.


[vii]Romalis, John.“NAFTA’s and CUSFTA’s Impact on North American Trade,” University of Chicago GSB mimeo, 2002. Print.


[viii]Beaulieu, Eugene . “Factor or Industry Cleavages in Trade Policy: An Empirical Analysis of the Stolper-Samuelson Theorem,” Economics & Politics. 14, 2, (2002): 99-132.


[ix] Moore, Karl, & Rugman, Alan.  “The Myths of Globalization” Ivey Business Journal 66, 1, (2001): 64-68

[x] Muirhead, Bruce. “From Special Relationship to Third Option: Canada, the U.S., and the Nixon Shock,” American Review of Canadian Studies 34, (2004): 23-56.


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